In a letter sent on Friday and seen by The Sunday Telegraph, the Transport Secretary warned local authorities he is "not prepared to tolerate" ill-conceived road closures due to cycle lanes.
A £250 million "emergency active travel fund" for England to encourage councils to create wider pavements, more bike lanes with protected cycle space and safer junctions was announced by the Government in May.
The plans will be funded by a £2 billion investment announced in February.
At the time, Boris Johnson urged motorists to "be courteous" towards cyclists as he unveiled "the most ambitious package ever" to boost active travel.
The Transport Secretary told council and local highways authorities he had noticed a "notable number of councils used their funding poorly and were simply out of step with the needs of the local communities".
Mr Shapps added: "I saw or heard from the public and parliamentary colleagues about far too many instances where temporary cycle lanes were unused due to their location and design, while their creation left motor traffic backed up alongside them; of wide pavements causing unnecessary congestion in town centres; and other issues that many have, rightly, reacted angrily to."
The next round of the project's funding would result in significantly less money going to councils who have failed to "embrace good design" or to consult with their communities, he warned.
Department for Transport figures show there has been a surge in cycling during the pandemic.